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FOREX - FUNDAMENTALS MAKE CURRENCY PAIRS MOVE (1.3)

FOREX - FUNDAMENTALS MAKE CURRENCY PAIRS MOVE (1.3)

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Published by Trading Floor
The key to making money in the Forex is understanding what makes currency pairs move. Ultimately, it is investors who make currency pairs move as they buy and sell different currencies, but these investors buy and sell for a reason. Either they see something happening fundamentally in the global economy that makes them believe a currency is going to get stronger or they see something happening fundamentally that makes them believe a currency is going to get weaker. In other words, they watch the fundamentals and make their decisions according to what they see
The key to making money in the Forex is understanding what makes currency pairs move. Ultimately, it is investors who make currency pairs move as they buy and sell different currencies, but these investors buy and sell for a reason. Either they see something happening fundamentally in the global economy that makes them believe a currency is going to get stronger or they see something happening fundamentally that makes them believe a currency is going to get weaker. In other words, they watch the fundamentals and make their decisions according to what they see

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Categories:Business/Law, Finance
Published by: Trading Floor on Mar 11, 2011
Copyright:Attribution Non-commercial

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12/16/2011

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Chapter 1.3
Fundamentals Make Currency Pairs Move
 
 
 1
FUNDAMENTALS MAKE CURRENCYPAIRS MOVE
The key to making money in the Forex is understanding what makescurrency pairs move. Ultimately, it is investors who make currency pairsmove as they buy and sell different currencies, but these investors buyand sell for a reason. Either they see something happeningfundamentally in the global economy that makes them believe acurrency is going to get stronger or they see something happeningfundamentally that makes them believe a currency is going to getweaker. In other words, they watch the fundamentals and make theirdecisions according to what they see.Fundamentals make currency pairs move. If the economic fundamentalsin the United States are improving, the U.S. dollar (USD) will most likelybe getting stronger because Forex investors will be buying dollars.Conversely, if the economic fundamentals in the United States aredeclining, the U.S. dollar (USD) will most likely be getting weakerbecause Forex investors will be selling dollars.You can learn to watch the fundamental economic indicators thatmove currency pairs just like institutional investors do. In this section,we will explain the following to help you build a strong fundamentalfoundation:
Contents 
Which fundamental economic indicators are most importantWhy interest rates are so importantWhat impact inflation has on interest rates
 
 2
NOT ALL ECONOMIC INDICATORS AREIMPORTANT
Globalisation has brought us all closer together and has broughtmillions of pieces of information to our fingertips on a daily basis. Partof becoming a successful Forex investor entails learning how to ignoremost of the news and information that bombards you every day so youcan focus on the important information.Not all economic indicators are important. You will see manyfundamental economic announcements that you do not have to paymuch attention to. For instance, unemployment in Ireland is not asimportant as unemployment in the United States. While Irishunemployment is certainly important in Ireland, the U.S. economy has amuch larger impact on the global economy so investors watch U.S.economic announcements more closely.Remember, it is ultimately large, institutional investors who move theForex market so you want to watch the same things these investors arewatching. Doing so enables you to more accurately predict what movesthey will make so you can take advantage of those movements.The most important fundamental economic indicators can be dividedinto the following three groups:You will learn more about economic strength and capital and tradeflow indicators in later sections. In this section, you are going to learnabout interest rates
the most important fundamental economicindicator in the Forex market.
Example 
One great way to take advantage of fundamentally drivenprice movement is to watch the news. You will learn how toprofit from unexpected news when you complete the NewsAnalysis section.- Interest rates- Economic strength- Capital and trade flow

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